The Icelandic government has decided to try to deal with England and Netherlands in the next days on how the Icelandic government can compensate the balances in the Icesave accounts of Landsbankinn to the ones who are hurting from the loss when the banks were bankrupt. It is the evaluation of the head men of the government that the only way to get the loan approved from the IMF and other governments is to finish these deals as soon as possible.

According to the sources of the Morgunblaðið the Icelandic government has been under a lot of pressure from the united nations and the founders of the European Union to make these deals. It has been public that it is the united position of all the 27 ESB countries to be against that Iceland gets the help from IMF until the Icesave debts have been negotiated about.

The ESB countries are not agreeing with the legal reasons of Iceland in he matters and say that this is a political perspective. It is reasoned in the matter that this issue has to be finished in the way that there is no doubt of the value of the executive order from the ESB, that is valid in all the European economic area, about the mutual insurance of the balances. If the unfortunate example is set by giving in on the deals to Iceland everything would be upset in the European bank market in the current situation and the balance owners would stop trusting the banks about practice in another country than its own.

The sources of the Morgunblaðið say that for instance the representatives of all the Nordic nations have made it clear that it will not work to talk about a loan from them until the Icesave disputes have been solved. It was also hinted by the ESB council that if Iceland admits the demands of England and the Netherlands the united nations will try to set the terms in an order that the debt and repayment would not be too heavy for Iceland.

Árni Mathiesen Minister of Finance spoke at the finance convention of the Union of Icelandic Provinces this morning. In his speech he noted that the unemployed increased by 1300 from the beginning of October to current date. Then he said that unemployment will increased substantially next month and add to about 3.5%. He said it was clear that this evolution is hitting hardest on the Capital area, but how things will evolve will later be clear.

He said that tax incomes are going to lower shortly, expenses will also lower and interest difference will be negative in a way that it will really matter. Then request and economic growth will lower very fast. Then he said there is uncertainty about most matters in the government financial areas. He says it is not unlikely that the income of the national treasury could lower by a quarter between the years 2008 and 2009.

He said it was evident that the contributions of the national treasury to the equalization fund of the provinces would lower by at least 10%.

Árni also spoke about the debts of the national treasury, which has increased significantly lately, and specially after the government nationalizing the banks and taking over their bonds. He said it was clear that the authorities have to make cut downs on expenses significantly in the next years. Both government and provinces. He said that the national treasury has nothing to spare to lower the debts of the provinces in the next years.

He recommended setting finance matters for provinces, to be able to ease the process of lowering expenses for the national treasury. Also he said that in an answer to a person at the meeting that the consults between the government and provinces has to be tightened shortly and put older disputes from the good seasons aside.
Worst situation seen

Halldór Halldórsson

Halldór Halldórsson, chairman of the Union of Icelandic Provinces, said in his opening speech this morning that the financial state of the provinces are now in their worst situation that has been seen. He used a well used metaphor and said that the provinces are now sailing their beat up ship back to the shore. He said that the provinces have to look to their financial backup, the government, and the Minister of Finance showed it understanding even though he is himself facing serious problems with the national treasury.

He said in the year 2007 not compatible to anything, when the finances of the provinces are viewed. Sales of lots, that was a big part of the income of provinces at that time, is now coming back to hit the chairmen of the provinces in the back, since the lots are being returned in great counts.

Halldór also spoke of the prices of the provinces and emphasized that the provinces in the country have to watch those matters in the next seasons. He said it was irresponsible to say that taxes and dues will not be raised in near future, that it is impossible to not reduce service. He spoke of the urgency to protect the basic service of the provinces.

‚No agreement has been reached with the IMF wich suggests that the government is vacillate in it’s stance. The issue isn’t threats from Britain or Holland or the position of the Scandinavian countries, but whether Icelanders are willing to shoulder their responsibilities or not. It is up to us. If we will not, than what little trust we still have and what small hope of symbiotic help from the international community. Iceland’s IMF loan application lies dormant until a clear heading is presented’ writes Skúli Thoroddsen, general manager of the Federation of General and Special Workers in Iceland, on the federations webpage.
‘It was the chairman of the board of governors in the Central bank that first raised the theory that Icelanders were under no obligation to guarantee credit balance accounts of the Icelandic banks abroad. That invoked the anger of the British. The emergency laws than confirmed that only credit balance accounts in Iceland were insured and the Brits went ballistic. What is most important to realize is that people can not be discriminated by race and it matters not whether the accounts were in branches in Iceland, London or Amsterdam. Every one should be equal, that’s the law that applies, even though the whole thing boils down to ethics of international trade and trust. That is the problem that the government is facing right now.’
‘Accourding to uncomfirmed statements it appears that the Icelandic government has decided to endeavor to reach an agreement with Britain and Holland in the next few days on how the Icelandic government will compensate the Icesave account holder. That is the only way to get a loan from IMF and other countries, and that is in fact the most important task of the day’ writes Mr. Thoroddsen.
‘Can we afford to take over responsibilities of the accounts abroad?’ Mr. Thoroddsen asks in his column.
‘No, we can’t. The burden of so much debt would mean that defection, collapse and decades of poverty her in Iceland if we were to carry it alone. We must therefore seek assistance and negotiate our way out of the crisis, acknowledge the political mistakes of last years and meet our destiny with humility. The longer we draw this out, the anger of the public in Iceland and abroad will escalate. People want to know where we are heading. We need a strategy and we are calling for accountability.

The country is facing destitution because of political mistakes that is a fact. Any trust the Central Bank had is long gone and others that bear some blame in the matter are the supervisory authorities both the Financial Supervisory Authority and the Ministry responsible for bank affairs (the Ministry of Commerce). It is there for only reasonable that the president of the Icelandic Confederation of Labor (ASÍ) is calling to the Ministers of Finance and Commerce to shoulder their responsibilities, seeing as they have failed in their official duties. One can agree to that. They should have been aware of the fact that the growth of the banks abroad was bound to end in misfortune.
Even though no one could have imagined the horrific consequence that was to be, the political and administrative responsibilities are great and unavoidable. They must assume it. But we must not forget the accountability of those that were responsible for the expansion and reaped the benefits at the expense of the public. Their day of reckoning has to and must be soon to come.’

José Manuel Barroso, president of the executive of the European Union said in a news conference in Brussels today that Iceland has to find a closure on the disputes to some member states to the union before Iceland can have the so called macrofinancial help from the unions funds.

“The executive will suggest to the member states of the European Union that Iceland will have help in such a form of loans that will be an addendum to the IMF loan,” said Barroso. It will only be capable if Iceland finds a resolution to the disputes about the double edged deals about insurance for the balance of foreign savings owners in Icelandic bank accounts. “We think it is very important that full equality is guarded in these issues,” says Barroso. “The member states of the European Union are asking that the terms that have been set will be honored.” said Barroso. He is convinced that these disputes will be resolved.

Barroso said that the management of the ESB have received a request for help by mail from Geir H. Haarde October 2nd. Macrofinancial-aid from the European Unions are thought of as for the European countries that are not affiliated with the European union and have another currency than the Euro.

Jón Ásgeir Jóhannesson, first chairman of 365 hf, insists that Ágúst Ólafur Ágústsson, chairman of the trade commission of the Parliament, desists putting pressure on the representatives of the three government banks to give answers about a loan given for the purchase of 365. If he does not drop the demand Jón Ásgeir will press charges. This is stated in a letter that Einar Sverrisson lawyer sent the committeemen of the trade commission on the behalf of Jón Ásgeir earlier tonight.

In the evening radio news from the Government radio yesterday a news coverage was done about the trade commission of the Parliament have called to a meeting with the bank manager and bank representatives of the three government banks next friday to figure out who lent Jón Ásgeir one and a half billion krónur to buy 365 media.

In the letter it is pointed out that in law about investment companies there is a clause about the board members of investment companies, chairmen, accountants, employees and whoever works a job for the company is bound to secrecy about anything they find out or hear about the practice of the company, business or private matters of their clients, unless they are obligated by the law to share this information. There is nothing in the law about parliamentary procedure or any other law that gives the select committee clearance to be informed about private matters of a businessman of a financial company.

Sumitomo Mitsui, Japans third largest bank, has filed a lawsuit against both Kaupthing and Glitnir in a London court. The lawsuit is regarding loans that Sumitomo, alongside other banks from Japan, Australia and New Zealand, granted Kaupthing and Glitnir.

Counting this lawsuit there are at least 6 court cases underway in London against the Icelandic banks from parties in Germany, Asia and Australia.

According to a story on Bloomberg, Japans largest bank, Mitsubishi, has also filed a lawsuit against Kaupthing, it was Mitsubishi that initiated the united bank loan to Kaupthing. Participants in the united loan were besides the Japanese bank, Cathay United Bank, Malayan Banking Bhd and Commonwealth Bank.

The Ministry of Finance has decided to put 385 billions Isk into the new Icelandic banks. This was revealed by Gunnar Svavarsson, head of appropriations committee in Althing today.

He disclosed that the Minister of Finance came to a meeting of the committee this morning to inform them of that decision; the minister is authorized to manage funds from the treasury and seek approval from the parliament after the fact if there are special circumstances. Mr. Svavarsson also said that authorizations for these expenses would be sought from the fiscal budget for this year or the next.
The Ministry of Finance will deposit 750 million Isk as initial capitalization to each bank, totaling to 2.350 million Isk. Landsbankinn will get 200 billions in owners equity, Glitnir will get 100 billions and Kaupthing 75 billions. The minister also said that no decision had been made about putting more money into the Savings bank.

Problems acquiring loans and disputes because of Icesave seem to have put the loan application from Iceland on slippery ice for an unknown amount of time. Steingrímur J. Sigfússon, chairman of the left wing party, said when he came out of a meeting with the board of standing committee on foreign affairs this morning that the situation is dead serious, the nation could not tolerate this situation any longer. The outlook is specially serious for export industry since everything is frozen to the core.

People surrounded the house of the Parliament today at noon to express their demand to have elections for the Parliament as soon as possible.

Steingrímur says that it condemnable that the government has nothing else as a resort to this situation than the International Money Fund. The case is in a total mess. Every single day in uncertainty is very dear for the nation.

It has repeatedly boiled over between politicians and their foreign confrere overseas because of the Icesave dispute. According to the newsroom Árni M. Mathiesen, Minister of Finance, was scolded at the meetings with other Ministers of Finance from other European countries in Brussels last week. It is said that Ólafur Ragnar Grímsson, the President of Iceland, had a quarrel with a foreign ambassador during a lunch meeting last Friday.

Steingrímur says that it was a terrible disappointment to experience how the English, Dutch and other European nations handled some issues and some of the Northern countries were more hesitant than expected.

He says it is hard to say what Icelandic government can do to improve these communications while they are being forced to sign political results for the Icesave dispute. Information arrived late and in a bad manner and the people of the nations are angry because of the process around the Icelandic banks. The name Iceland is drastically damaged and the reputation of the country is in a bad shape. This is harsh and very sad.

Registered unemployment in October was 1.9% or on average 3106 people and the number of people who were unemployed grew by 877 people since September. At the same time of year in 2007 the unemployment rate was 0.8% or 1315 people.
The directorate of labour says that usually unemployment increases between October and November. Last year unemployment was similar for both months and was then 0.8%. Unemployed at the end of October increased from the end of September to 1447 and to 2627 from the same time in 2007.
The directorate of labor says it is hard to estimate unemployment these days because of the massive recession in the economy and mass layoffs, but the unemployment rate in November will probably increase dramatically and be about 3.3 – 3.8%.

The International Money Fund has suspended the procedure of a loan for over two billion dollars to Iceland for an undecided time, the Financial Times states today. Ólafur Ísleifsson, lecturer at the University of Reyjavík, says that it is obvious that there are some serious kinks in the procedure.

Financial Times repeats from one of the presidents of Fitch Ratings that Iceland is now stuck in mid air. The country obviously needs a new regulatory environment around the finance and currency matters but need the help from the fund to be able to do so. The suspension comes at the same time as it is clear that the Icelandic government has not got the promise for the amount that is needed to meet the plans of the money needs of Iceland.

The paper repeats after a representative from the Icelandic government that the Icelandic nation urgently needs 500 million dollars. There has not been any resolutions in the disputes about the Icesave accounts, from Landsbankinn, between Iceland and the Netherlands and England and that also seems to be slowing down the procedure of loan from the fund.

There is growing rage in Germany as well amongst the clients of Kaupþing Edge, who are worried that they have lost all their money. It is expected that there are around 30 thousand individuals who are hurting from this and they are now demanding actions towards Icelanders.

Ólafur Ísleifsson, lecturer at the University of Reykjavík, says that it is obvious that serious kinks in the matters of the Icelandic application for assistance from the IMF. He says it is very important to brief the people of Iceland better about the situation.